UK manufacturing output and orders hit 19-year highs

29 November, 2013

The recovery in the UK manufacturing sector gained further momentum in November, with the monthly Markit/CIPS Purchasing Managers’ Index (PMI) reaching its highest level since February 2011, and marking eight months of continuous expansion.

Manufacturing production and orders grew at rates at, or close to, 19-year high. The domestic market continued to be the main driver of new orders, but export orders rose as well.

Employment in UK manufacturing climbed for the seventh consecutive month, with the rate of increase hitting a 2.5-year high.

“UK manufacturing continued to hit the high notes in November,” comments Rob Dobson, senior economist at the survey compiler, Markit. “The sector is on course to beat the 0.9% increase in output seen in the third quarter, with the quarterly pace of growth so far in the final quarter tracking comfortably above the 1% mark.

“It also looks as if the strong recovery in the sector is translating into meaningful job creation,” he adds. “Manufacturing employment rose at the fastest pace since May 2011, signalling that companies are currently creating around five thousand jobs per month.

“The manufacturing expansion remains broad-based by sector, demand from the domestic market continues to surge higher, and new export orders are rising at a clip close to October’s 32-month high,” Dobson reports.

According to David Noble, CEO of the Chartered Institute of Purchasing & Supply, the manufacturing sector’s solid growth “was primarily underpinned by a strong domestic market, boosting new business in the UK and giving manufacturers the confidence to look ahead to the future. This was coupled with new export orders from key overseas markets accelerating at one of the fastest rates since the financial crisis.

“The industry’s on-going recovery has given rise to a substantial expansion in purchasing activity but, similar to previous months, the sector is still experiencing some shortages, particularly in raw materials, implying that supply chains still have some catching up to do with the market,” he continues. “With good signs that growth will be maintained, suppliers go into the New Year with more opportunities than the challenges of previous years.”

• The November PMI for the Eurozone reveals that output, new orders and exports all grew for the sixth successive month, but that employment in the sector fell for the 22nd month in a row. There was good news from Greece where manufacturing output rose for the first time in more than four years and new orders stabilised. But France slipped to the bottom of the PMI league table, and was the only Eurozone nation to report declines in both output and new orders.

“The November manufacturing PMI surveys bring good news on the whole, but suggest there’s still a lot to worry about in terms of the health of the Eurozone economy,” says Markit’s chief economist, Chris Williamson. “Overall, manufacturing across the region is enjoying its best performance for two-and-a-half years, but the pace of growth remains only modest. The data suggest that output is rising at a quarterly rate of only around 0.6% in the fourth quarter so far.

“The most promising recovery signs are largely confined to northern countries, with strong growth being recorded in Germany, the Netherlands and Austria,” he adds. “More southerly countries continue to disappoint, though – especially France and Spain, where renewed downturns are evident.

“Importantly, improving export performances across a range of countries such as Italy, Spain and Ireland are offsetting domestic weakness, underscoring how producers in these countries are becoming more competitive and suggesting the long-term outlook is brightening.

“The big concern is France, which was the only country except Greece to see exports fall,” Williamson continues. “With some improvement in domestic demand helping Greek producers report the first increase in output in over four years, France has sunk to the bottom of the Eurozone PMI rankings.”